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HMRC internal manual

Corporate Finance Manual

From
HM Revenue & Customs
Updated
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Deemed loan relationships: shares with guaranteed returns: non-qualifying shares: the associated transactions condition: meaning of associated transaction

Associated transactions

This guidance applies to companies that hold shares up to 21 April 2009

CTA09/S532(3) and (4) defines associated transaction as including entering into, or acquiring rights or liabilities under any of the following:

  • a derivative contract;
  • a contract which would be a derivative contract apart from CTA09/S591(3) (hedging of shares);
  • a contract having similar effect to either of the above;
  • a contract of insurance or indemnity.

For all times on or after 12 March 2008, associated transaction also includes acquiring rights or receiving benefits in respect of other shares.

Where an associated transaction is not actually a derivative contract, it is to be taxed as if it were a derivative contract with credits and debits being brought into account on the basis of fair value accounting (CTA09/S588).

Note that the list of associated transactions is not exhaustive, and is limited only by its ability to produce an interest-like return in combination with the shares. If HMRC staff come across a case where a share and another transaction gives rise to an interest-like return but it is claimed that the other transaction is not an associated transaction, they should seek the advice of CTIAA (Financial Products Team).